A sum at compound interest, compounded annually, amounts to ₹13,230 after 2 years and to ₹13,891.50 after 3 years. What is the sum?

Explanation

1. 01

   The third year's interest = ₹13,891.50 − ₹13,230 = ₹661.50, earned on ₹13,230.

2. 02

   Rate = $\frac{661.5}{13230} \times 100 = 5\%$.

3. 03

   Sum = $\frac{13230}{(1.05)^2} = \frac{13230}{1.1025} = 12000$, that is, ₹12,000.